Amendment No. 1 is out of order because it is not relevant to the provisions of the Bill.
Finance (No. 2) Bill 2007: Committee and Remaining Stages.
I move amendmentNo. 2:
In page 3, before section 1, to insert the following new section:
ANOMALIES IN THE STAMP DUTY REGIME
1.—It shall be a function of the Commission on Taxation to be established by the Government to examine anomalies in the stamp duty regime including the plight of families and individuals leaving properties such as apartments to trade up to an affordable family home.".
I begin by congratulating you, A Leas-Cheann Comhairle, on taking up your office. I hope you enjoy it.
I look forward to it immensely.
The purpose of this amendment is to charge the proposed commission on taxation with examining the anomalies in the stamp duty regime. During last night's brief Second Stage debate, I had time only to refer to the situation of those people caught out by the backdating to 31 March. There are other anomalies relating to stamp duty, which I hope the Minister will review.
One of these relates to the capacity of developers, builders and others engaged in the construction sector to employ mechanisms for the avoidance of stamp duty, either through licensing arrangements or through the sale of shares in a company so that the transfer rate is that applicable to shares as opposed to the residential rate of 9%. These avoidance mechanisms are part of the same old story. People on modest incomes who purchase modest properties, including those trading up, are subject to a fairly high level of stamp duty. I acknowledge that stamp duty is high in Ireland probably because we do not have the year-on-year property taxes that exist in many other European countries. We have instead one regime which applies the full weight of stamp duty to people purchasing houses in which to reside and another which allows the construction industry and people who buy significant properties to make use of avoidance mechanisms. During the previous Dáil, the Minister conceded on a number of occasions in debates on stamp duty that he was concerned the people to whom I refer were avoiding payment. He introduced an amendment to the last Finance Act to tighten up some of the stamp duty avoidance mechanisms, particularly in regard to licensing arrangements, but he failed to have the relevant sections commenced.
This is an area that deserves scrutiny by a commission on taxation from the point of view of equity and tax justice for people in the PAYE sector. It is difficult enough for people to pay tax at any time, but it is particularly galling to believe that one law exists for people on modest incomes in the PAYE sector and an entirely different one for multi-millionaires. We have seen significant property transactions being conducted in certain parts of Dublin, such as the sale of hotels in Ballsbridge. I challenge the Minister to indicate how many of those transactions were subject to the 9% rate of stamp duty. I am confident that a large proportion were effected by the transfer of shares attracting a lower rate. I have put these questions to the Minister on previous occasions and wonder whether he will comment.
I do not want to fight the general election again because the people have voted and we have an outcome. The position taken by Fianna Fáil on stamp duty was a fix-up solution of creating an absolute exemption for all first-time buyers regardless of the value or size of the property. Last September the Progressive Democrats Party brought stamp duty to the national stage as an election issue, with Michael McDowell taking to the airwaves to argue for major changes to stamp duty on the grounds that most of the income derived by the Government was unnecessary and allowed for tax reliefs worth billions of euro. However, even the Progressive Democrats argued that a house with a floor area in excess of 1,350 sq. ft., or an average three or four bedroom house, should not be totally exempt from stamp duty. The present proposal is to completely exempt all first-time buyers. We have no problem with exemptions for those purchasing modest former local authority houses worth €400,000 or €500,000 in Cabra, Finglas or elsewhere in the Dublin area. However, a person who has the means, as a first-time buyer, to buy a luxury residence for €6 million or €7 million, will be completely exempt from stamp duty. Such a person's saving on stamp duty could be multiples of the cost of an affordable home.
The second anomaly, which is a serious social problem that the Minister must address, is that in the past seven years the development of affordable housing has meant that many couples have bought an apartment. They are now in a position where they have, or intend to have, a family and they need to trade up to a house. They bought their affordable apartment free of stamp duty. This issue is of particular concern where people are buying a second-hand property. It is not such an acute problem outside Dublin or in rural areas where the supply of new properties at affordable prices is much greater. However, in cities such as Dublin, Cork, Limerick and Galway, where second-hand properties are often all that is available to people in the areas where they work, they face very significant stamp duty bills although their means are modest. The position of people who are trading up to buy a family home in which to reside should be the subject of some concern by the Government.
While the Minister's proposals to increase mortgage interest relief are welcome they do not address the fact that people who move from an apartment to a three or four bedroom house to cater for a family may, depending on where they buy, face stamp duty bills of between €25,000 and €70,000. That is a lot of money, representing a very large additional mortgage commitment. I urge the Minister and his officials to examine this issue in the context of housing and social needs.
These are some of the areas that the commission on taxation, when formed, should examine. The Labour Party shares the Minister's concern that the revenue base from stamp duty be conserved. The pre-budget estimates and review suggested that the total take on stamp duty last year from first-time buyers was approximately €70 million. The stamp duty take from first-time buyers buying properties worth less than €635,000, that is, the people to whom I have referred, was €66 million. In the Fianna Fáil manifesto, the Minister estimated that for the rest of 2007, mortgage interest relief and stamp duty relief would cost €88 million. Therefore, the price of the package before us is relatively modest.
I appreciate that the Minister's objective is to conserve part of the taxation base, but there are key people who not being facilitated by this move. The biggest problem is for individuals and couples who have or intend to have a family but have lost their first-time buyer status because they bought an apartment. If the apartment is on the fringes of Dublin or other cities, the capital appreciation may not be significant. They now need to buy a family home to live in. They are not investors and their plight is one of particular concern. I hope the Minister will address this issue.
I welcome the amendment tabled by Deputy Burton which goes to the heart of the debate on this Bill. Deputy Burton opens up the issue of addressing anomalies that have arisen in stamp duty. I agree with the Deputy that the Bill before us today is only a partial response to the problems that have been created by the stamp duty structure.
The Minister does not need me to tell him that the thresholds on stamp duty are entirely different from those that operate within the income tax code, for example. One does not have a band that is exempt, a band that is at a certain rate, with only the excess over a certain price charged at the top rate. The effect of this on families has been savage. It means that for every 1% increase in house prices, we have seen a 4% increase in the stamp duty bill. This has had a massive impact on very ordinary families, particularly in Dublin. In 2002, the stamp duty on an average house in Dublin was €9,000, which many people thought was a great deal of money, although perhaps it was affordable. However, today, the stamp duty on a similar house is €41,000. House prices in the intervening period have grown by 75% but the stamp duty bill has quadrupled. There is no justice in that and the people who are being singled out for this tax are not in the investor or speculator category. They are not super rich, but ordinary families who want to buy in a neighbourhood with established services. They include people who need to move on and make a fresh start following the breakdown of a marriage, or people who want to move from a one-bedroom apartment to a house. Why should these people be singled out for savage tax treatment?
In no other area of the taxation code has the yield quadrupled in a four-year period. Under no other tax are people asked to pay €41,000 in one fell swoop, the equivalent of an entire annual salary of many who are in the first-time buyer market. There is no justice in that and, as Deputy Burton stated, these anomalies were unintentional. As the former Minister Charlie McCreevy told us, the taxation code was designed by William of Orange and dates back to a long time ago when the world as we know it was never envisaged. We need to consolidate the code and bring people back into the inner cities where there is property. That was not a consideration of William of Orange. The code must be modernised, workable and accepted as fair. This is a task for the 30th Dáil.
The Minister for Finance has not been keen to reform stamp duty, but he now has five years in which to think about it. He has agreed to a taxation commission, which should be mandated to look at it as the amendment requests. I would go much further and I have tabled an amendment seeking to immediately reform this tax. I will not rerun the debate during the general election but many believe the tax we are exacting from the housing market is unfair, unjust, unsustainable and incoherent. This tax is important to many families and also in the context of long-term competitiveness because the way the housing market has gone is undermining the whole competitive base of the economy. This is not the only area of the taxation code that must be reformed but it is an important step in producing a system that is equitable and fair.
I regret that the amendment tabled by my colleague, Deputy Morgan, on the tax placed on transactions at ATMs was not allowed. It is a matter for another day.
I support amendment No. 2 tabled by Deputy Burton. We highlighted a number of statistics on Second Stage but when one takes on board that 36,000 out of the 38,000 first-time buyers in 2006 paid no stamp duty, it demonstrates that the numbers who will benefit from the Minister's stated intent in this legislation will be extremely small. More worrisome is that those who will benefit are most likely to be those who can most afford to pay the stamp duty demand. We cannot lose sight of this in evaluating the steps to be taken. The average house in the State cost €278,000 in April of this year and no stamp duty is paid on houses costing less than €317,501. While the Minister has not indicated a willingness to revisit the construction of the proposal, this amendment seeks to allow the commission on taxation to examine the anomalies that make it difficult and in some instances impossible for families to trade up.
It must be recognised that many first time house purchase transactions are carried out by single people and couples without children. However, people's circumstances change. While they may have been very comfortable in the apartment or starter home in which they set out in life as independent adults in society, they may find that the accommodation is inadequate to meet the needs of young children and growing families. There is every justification for addressing these anomalies that make it extremely difficult for people to trade up in line with their need. It is important to emphasise need. It is not that people simply aspire to something grander. They need to move to accommodation commensurate with their family's requirements. It is to represent them that I support this proposition. There is a basis for an examination of what is possible in addressing the various restrictions, obstacles and curtailments currently in place for people moving up the property ladder in terms of scale to meet the needs of growing families. I hope the Minister will respond positively.
I lend my support to amendment No. 2. To put it in context, in the past year some 2,000 people, approximately 5%, of the 38,000 first-time buyers paid stamp duty. It is an immaterial number. The €70 million collected from a total intake from stamp duty of €4 billion will have little, if any, impact in terms of the housing market. The Government has missed a golden opportunity to properly reform the stamp duty regime which is currently inequitable. It should have dealt with the issue of people trading up to their second home.
Traditionally people buying their second home buy in the second-hand market rather than going back into the new house market. First-time buyers have no equity. However, people who have sold their house are moving with equity. The problem is that they are selling to a first-time buyer who will pay no stamp duty but they themselves must pay stamp duty if they are buying a second-hand house. If the house costs €300,000 the stamp duty will be 5%, just short of €16,000. It is not my intention to rehash my party's general election proposals, but one of our proposals was to reduce stamp duty to 3%, which would have brought the stamp duty down to €10,000. It would have meant an extra €6,000 for the person trading up. That is an opportunity the Government missed. People may not be aware that a homeowner buying a second-hand home is in the same position as an investor. That should not be the case. This is an anomaly that should be examined by the commission on taxation.
The problem is that what is proposed in this Bill will achieve very little. All it does is eliminate stamp duty for 2,000 of 38,000 first-time buyers. It does nothing for the person moving house, and there are various reasons people move. Should they be penalised if they have to move from one area of the country to another by reason of their job or because there has been an increase in the size for their family? This Bill, as far as I am concerned, is nothing but a sham. It does nothing for the genuine home owner who wants to move house. The irony is that approximately 99% of first-time buyers purchasing outside the main Dublin area pay no stamp duty. This Bill does nothing in terms of the proper reform of stamp duty which should take place. The proposed commission on taxation should examine this issue. We should push forward to ensure a fairer stamp duty system.
This Bill could be described as a minimalist measure. I support the proposed amendment.
The real problem with stamp duty, as it has now developed, is that it has become an unfair tax. We have learned in this House down through the years that if we ignore an unfair tax, difficulties are created. I do not believe the reform proposed by the Minister will resolve the difficulties in the housing market created by the barriers which stamp duty pose.
I welcome that the Minister is providing relief for first-time home buyers. However, I agree with Deputy Burton that we are now in the anomalous position whereby a person who has lived in rented accommodation and not purchased a residential property and succeeds through business in becoming wealthy or wins the national lottery will be able, as a first-time buyer, to purchase a house worth €3 million and not have to pay any stamp duty.
This issue needs to be addressed by the commission simply because the Minister has turned his face against any other amendments to this particular inequitable duty. Clearly, we do not have the numbers in this House to succeed with the amendments which will be discussed later.
The reality is that an elderly retired couple living in Dublin in a relatively modest semi-detached home worth €900,000 to €950,000 wishing to downsize to an even more modest home or apartment worth in the region of €500,000 to €600,000 will be penalised by the State to the tune of 7.5%. It is not possible to buy a reasonable sized apartment in south Dublin for less than approximately €500,000. It is practically impossible to buy anything for less than that amount. There is no reason a retired individual, an elderly individual or an elderly couple wishing to downsize should be penalised by having to pay €35,000 to €60,000 in stamp duty. A fairer system, if stamp duty is imposed, would require those moving home to pay stamp duty on the difference between the moneys realised from the sale of the home and the cost of the new house being purchased. Also, where a person downsizes and purchases a smaller home, stamp duty would not apply.
The problem with the Minister's proposal is that for many of the elderly their homes are their only investments and they see the difference between the sale price of their home and the purchase of smaller homes as providing them with some security for the future, but the State will relieve them of €40,000 to €60,000 of that sum. Stamp duty is an unfair tax in that context. It is equally unfair that young married couples who are trapped in small apartments and wish to trade up are given no relief by this particular measure.
I support the amendment. I know this issue will be discussed in greater detail later. If a commission on taxation is to look at this matter, I suggest that it be looked at inventively. Is there any reason stamp duty, which amounts to an enormous sum, should be paid in one payment? Should an instalment system be available as an alternative where, for example, added interest could be paid if one chooses to pay by instalment? Many people would find it much easier to move home if stamp duty could be paid on an instalment rather than on a once-off basis. No thought has been given to that.
We will have to return to this issue at a future stage. This legislation will lead to movement in the housing market with regard to first-time home buyers. However, we must also encourage elderly and retired people who want to trade down to do so and make available existing housing stock for married couples with children who are seeking to trade up. The barrier which stamp duty creates for such elderly people will not be removed. That issue must be addressed.
I welcome the opportunity to contribute briefly to this debate, particularly the issue dealt with by the amendment. The tenor of the legislation is clear and is to be welcomed. I compliment the Minister on the Bill, which will deal with the question of first-time buyers and will bring stability to the market. The introduction of the Bill honours a commitment given by the Minister prior to the election. He is to be complimented on honouring that commitment.
The amendment would bring back an element of instability by raising the possibility of what might or might not happen between now and budget day or the date of some future decision. That is the last thing the construction industry wants. The two parallel tenors of the bill are clear and the people have decided that this is what they want. They supported what the Minister and the Fianna Fáil Party put forward. Others set out their stalls and were rejected. Some of those stalls would have been helpful to the 50,000 sellers with little recognition of the needs of first-time buyers.
The point has been made that a first-time buyer could be a multi-millionaire and would be exempt from stamp duty, but that argument does not make sense to me. Why would such a person never have thought of buying a house until now? If a small number of Lotto winners wish to buy their first houses, so be it.
I welcome the Bill. We must make it clear that first-time buyers may purchase houses without paying stamp duty and that stability has been restored to the market. To extend this exemption to others who are already on the property ladder would take from the tenor of the Bill, which is to look after first-time buyers and to restore stability to the market.
I agree with my colleague, Deputy Finneran. One of the purposes of this legislation is to put the stamp duty issue to bed and end the uncertainty and instability surrounding it. Anything else that may be done from time to time can be done in a budgetary context, thus taking stamp duty out of the realm of speculation. I found the picture painted by Deputy Shatter, of a modest home worth €950,000 owned by an elderly couple, to be absolutely surreal. Perhaps they were there for 20 or 30 years and may have paid £9,000, £19,000 or £29,000 for that modest home. Enormous capital gains have been made by people who own homes in the Dublin area and elsewhere. In some cases, the value of homes has appreciated by several thousand percent over 20 or 30 years. The argument is now being proposed that people who have made such gains and are trading down, should not pay a relatively small amount in tax to support social welfare services. I do not know where equity has gone in the argument over stamp duty. I have not seen any of the groups or agencies concerned with poverty issues talking about this matter. In any case, that particular suggestion is somewhat removed from Deputy Burton's amendment. The giveaway word in that amendment is "affordable", which is what the buyer can afford. It is well known that if buyers do not have to pay stamp duty they can afford more. That is why very often, unfortunately, well meant concessions have the effect of driving up prices, so one ends up paying as much but with the difference that the State does not get the benefit.
We need to pay some attention to the tax base. We have been running healthy public finances and have had a reasonable surplus in recent times, but we must be careful not to erode the tax base. Twenty years ago, I can remember the Labour Party bemoaning the lack of proper capital or corporation tax revenue. Under both those headings, revenues have now increased exponentially. In the case of corporation tax it is because of prosperity, investment and bringing the rate down to 12.5%, which made it worthwhile to do business in this country. I accept the Labour Party was also involved in this. In 1986, revenue from capital taxation was approximately £36 million, while corporation tax accounted for about £257 million. Revenue from those sources has increased enormously, however, which has enabled us to do a whole lot more. Therefore, the Labour Party in particular should think carefully about how much it wants to erode the capital tax base.
On amendment No. 2, the programme for Government contains a commitment to establish a commission on taxation, which would give a wide remit to consider the structure of the taxation system. The commission will be charged with examining the balance achieved between taxes collected on income capital and spending and reporting on it and reviewing all tax expenditures with a view to making recommendations on those that are unjustifiable and those that can continue to be justified on a cost-benefit basis. The commission will also have the opportunity, as mentioned in the programme for Government, to consider options for the future financing of local government. In the context of maintaining a strong economy, it will investigate measures to protect and enhance the environment, including the introduction of a carbon levy or tax.
I will bring proposals to Government in the near future on matters relating to the establishment of the proposed commission, including formal terms of reference, but I do not consider it appropriate that the terms of reference be the subject of legislative provision, as envisaged in the amendment.
The Government's position on stamp duty is clearly set out in the programme for Government and our emphasis is on assisting first-time buyers who are those most in need of assistance. This has been the consistent approach of successive Governments of different political compositions for the reasons I have given and to which Deputy Kieran O'Donnell adverted. We have committed to the abolition of stamp duty for all first-time buyers and this is being addressed in this second Finance Bill. We have also committed to increasing the ceiling on mortgage interest relief for first-time buyers in the next budget, having doubled it in the last budget from €4,000 to €8,000 for a single person and from €8,000 to €16,000 for a married couple. The changes to the ceiling on mortgage interest relief will affect first-time buyers and those who bought a house in the past seven years so there are more beneficiaries than merely those currently in the housing market.
Having doubled mortgage interest relief in the last budget, I will propose in the next budget changing it from €8,000 to €10,000 for single people and from €16,000 to €20,000 for couples or widowed persons. I will also propose maintaining this tax relief at 20% for all home owners even in the event of future income tax rate reductions that were also envisaged in our manifesto on the basis of maintaining a strong economy.
This is what we said we would do when we went to the people and I now feel honour-bound to enact our proposals. There has been a vigorous debate, in part instigated by others, and the issue has had a full airing in the public domain and in political debate for some time, although people will probably continue to disagree on it.
Deputy Mansergh referred to re-inflation and this is something that has not been thought through. At the moment we are seeing a correction and a reduction in housing output and this must take place because double-digit house price inflation is unsustainable. It could have caused an unhealthy housing environment where issues of affordability were prevalent. There have been eight mortgage interest rate increases of one quarter of one percent and this has also softened the market. These matters are not in our direct control but are decisions made by the European Central Bank in the interest of price stability in the euro area.
Even allowing for this, we are in a much more benign interest rate regime now then ten, 15 or 20 years ago. The issue here is to have a targeted and affordable initiative that will address the matter of getting people on the first rung of the housing ladder. The point made by Deputy Mansergh in response to Deputy Shatter is fair. We have seen huge gains in capital appreciation for the category of person under discussion, although I accept that they are mentioned merely as an example. The fact is that there is no annualised property tax in this country, as has been mentioned, and we have a full principal private residence exemption in respect of capital gains in the event of sale. The argument that the imposition of the tax duty might prevent a person trading down, in the context of capital appreciation with a full tax exemption, does not stand up to robust scrutiny. The payment of stamp duty by instalments, as has been suggested, could have implications for the registration of title in the registries. As Deputy Shatter will be aware, documents presented to the Land Registry or Registry of Deeds must be stamped with the full duty chargeable under the stamp duty code.
Notwithstanding the ideas and suggestions made by the Opposition, as Deputy Finneran noted, the context of this debate is the need to bring stability and certainty to the market. Strong views have been expressed in the discussion of these matters. Let us not forget that when the Fine Gael proposal, which was subsequently supported by the Labour Party, emerged it resulted in continuing uncertainty. This has been documented.
I could not see how it was equitable, sensible or a good idea to sort out a perceived problem facing the 53,000 people who enter the property market in a given year by changing the taxation code at a cost of up to €600 million — the anticipated figure for year two or three following implementation of the measure — to be paid for by 2.2 million other people in tax forgone. It is inevitable that we will return to a political debate during our interaction this afternoon. I regarded the proposal as a vote-catching exercise because it failed the basic equity tests.
I concur with Deputy Burton that it is important to protect the tax base. While this does not preclude reform, it precludes introducing measures costing hundreds of millions of euro annually to address a matter related to purchases of residential property, which last year affected 54,000 people. The focus of much of the argument has been the high cost of stamp duty for houses costing more than the threshold of €635,000. The 4,500 people who bought houses above this threshold last year would be significant beneficiaries under the Opposition proposals.
At some stage, one must ask what we are trying to achieve. Our purpose is to assist people to get into the property market and stabilise and bring some certainty to the market. In so doing, we want to be equitable and ensure any measures we introduce are affordable.
As Minister for Finance, I argued my case within the constraints imposed upon me by my office because any comments I make will be picked up by the market. It is a misrepresentation of my comments to contend, as has been done continually, that I stated there would be no change. I said three things, namely, that I would not enter into speculation, that anything we would do would assist first-time purchasers — I have introduced two initiatives to assist first-time buyers in three budgets — and that I would not do anything to disrupt the market. I did not say I would not do anything.
I found the span and scope of the proposals made by the Opposition parties to be disruptive of the market because they would have a reflationary effect in a period in which a correction to bring longer term sustainability and stability to the market is taking place. The benefits of their proposals would not go to the purchaser in the vast majority of or even all cases. As Deputy Mansergh stated on the issue of affordability, if, in a sellers market, the stamp duty imposition on a house costing €350,000 is reduced to €10,000, another €20,000 in equity becomes available to the buyer. That is the way the market works. These basic dynamics, which are observable to all, greatly invalidated what I am sure was a well-intentioned effort to introduce comprehensive reform of stamp duty. I still do not believe it is the right way to go. There will be those on the other side of the House who will defend their position and continue to argue with me about it.
As was noted, this issue has been discussed. We have hit every door in Ireland and said what we would do. We are here in Government and I am honour bound to do this. If the Members opposite were on this side of the House, they would tell me what they intended to do. Fine Gael intended to do this over a three-year period. It was pretty indeterminate as to when it would happen but it was going to happen at some stage.
The Labour Party leader said it would be done as he was coming down in the car from Áras an Uachtaráin. That is how matters progress, how the debate develops and how it all works out in the end.
When he was in the Seanad, Deputy Mansergh made the point on the Finance Bill at the time this issue was raging — he repeated it in recent days — that we need to be careful because issues such as this require to be dealt with in the budgetary context. I am not suggesting we should impose a vow of silence in terms of policy initiatives coming up to elections — they are the reality and it is a democratic debate. If the people want to raise the issue, as they did, we respond. However, while we had a trenchant debate on the matter, none of us can deny there were behavioural consequences as a result of that debate in that an expectation was created, one way or the other, which had the effect of causing some dislocation to the market. It was not the exclusive cause because, obviously, the increase in interest rates has also had a gradual effect in the past couple of years and, in some respects, as I have said, that correction is welcome. However, the debate has had an adverse effect.
I am not sure how we manage this for the future but there is a responsibility on all of us to try to have these debates within a certain period, after which decisions are taken and we move on rather than creating prolonged uncertainty, which has had a detrimental effect in this case. It is not uncertainty from which the building industry need not recover — I do not suggest that is the case. However, I felt that if the initial manifestation of the policy emanating from the opposite side were to operate over a three-year period, it would have a very detrimental effect. In any case, that issue was clarified over a period.
Issues such as this are dealt with by way of resolution on the day of the budget because we want to make sure a new situation applies the next day, whether in the context of excise, stamp duty or any other matter. We do this so people do not speculate on the basis of what it is we are trying to achieve and take an unfair advantage.
The other point is that we must not talk down the economy. We can continue with good, strong growth rates. While we recognise there is no room for complacency, we have a wider responsibility, beyond our party political interests or defending the respective positions which we have trenchantly argued recently, to make sure we do not inject a sentiment into the economic debate that would be a prophecy of doom. We must not worsen a situation which needs to recover by injecting that intangible sentiment. To do so would have an effect because all of us, as public representatives in our local areas and in our areas of responsibility, are in touch with people in the industry in every respect.
When I talk about the industry, I am talking about the 280,000 people who work in it — the tradesmen and workers, not just those who own construction companies or land banks. Almost 14% of our workforce gets up every morning and goes to work in this industry. Not all of them work in the residential sector but it is a very important sector, quite apart from our public works projects, which we intend to increase as a percentage of our overall economic activity in the coming years under the national development plan.
The point is that as this correction takes place, we will move from the high of 90,000 completions. Ten years ago there were 33,000 completions, but last year 93,000 were registered, some of which, approximately 5,000, were an overhang from the previous year. Let us assume there were 88,000 last year and that we move towards approximately 75,000 this year and 70,000 in subsequent years. We need to get the kind of path in terms of housing output that will not have an adverse effect on confidence in the economy generally, that will maintain employment in the residential sector to the greatest extent possible and that will help in the take up of our increased public work programme and capital programmes in all the areas of social and physical infrastructure we see being rolled out year on year. We must ensure we get through this period in a way that reinforces rather than saps confidence in the industry so as to avoid the worst adverse effects a correction may bring.
We all recognise there is a softening in the market and we need to avoid doing anything to make the situation appear worse. I do not suggest anyone here is engaged in that, but sometimes in the heat of debate a situation can be portrayed to the public as being worse than it is or it can be suggested that the situation cannot be corrected quickly so we can move on at a level of activity far greater in historic terms than would have been the average ten or 15 years ago.
It is for this important reason that we have brought forward our proposal. I do not take away from the sincerity of the arguments of the Opposition, nor do I suggest or speculate that the proposal is for other reforms. All matters relating to tax base, revenues and spending plans are part of the budgetary context, which is an annual process. The issue here is to bring certainty to the market and send a clear signal on the plan for the forseeable future, based on the initiatives we are taking. They are targeted at the first-time buyer and by definition are affordable in the overall macro-economic and fiscal framework that was the basis for the proposals we put to the country. The wider, what the Opposition would call more comprehensive but what I would call more scatter-gun, approach that thinks we can deal with every segment of the market in the same way, with a cost of hundreds of millions for 53,000 or 54,000 people annually which would be paid for by 2.15 million other workers, seems to be an approach that would not lend itself to stability or certainty nor enable the correction to take place and reduce the double digit house price inflation that has been a characteristic of our very buoyant and, in recent years, overheated market. The market is now heading towards stability with prices heading back to where they were in August last year. Let us ensure that as a result of the passing of this legislation, the market will take the positive signal it is meant to send and housing output will recover, not back to the record levels of last year, but to a level where we get the soft landing that is in the interest of everybody, including the tens and hundreds of thousands of people who depend on the industry for a livelihood.
I listened with interest to the Minister's points and understand why, as Minister for Finance, he argues his point regarding taxes forgone and the cost of Fine Gael-Labour proposals in the area. With respect, he is looking at the issue from a narrow point of view and ignores important facts. The increases in the cost of housing for young people and people who find it necessary to trade up because of an increase in family size have led to significant personal indebtedness.
It is very easy not to do anything about stamp duty and just tag it on as another part of the costs of a house. However, the result, as we have seen over recent years, is that personal indebtedness increases enormously. When the Minister argues about the loss of revenue he ignores what is happening on the other side. If my personal debt goes up I will look for an increase in salary or wages and that has a knock-on effect on the overall performance of the economy. Two people in a household will have to work outside the home to cover the repayments and the cost of child care. Recent budgets have endeavoured to deal with child care costs.
It is foolish to ignore the cost of housing. Dublin Deputies can confirm the accuracy of what I say. My son's end-of-terrace, three-bedroom house in Stepaside cost €420,000 off the plans. Ten months later, phase two of the development came onto the market at €525,000 for a mid-terrace house. That is an increase of €105,000 within ten months. If one has the income one can borrow 110% but one is borrowing to pay the stamp duty. That drives up demand for higher wages to meet repayments and to justify the loan one must take out to purchase the house.
If the Minister argues narrowly about forgoing the income from stamp duty taxes he is correct. He is, however, ignoring the other costs involved by not doing something about them. There is a shortage of property for people who want, or are forced because of the sizes of their families, to trade up. I was brought up in a three-bedroom local authority house, 45 St. Begnet's Villas, Dalkey. Does the Minister know that those houses were sold for almost €1 million each? That was because of the shortage of housing in my constituency. The Minister can ignore the stamp duty element of that and say that he cannot afford to forgo the taxes but he should consider the demand that will arise for higher salaries to justify the repayments for a three-bedroom house. The Government is not taking that into account in this debate. It is foolish to ignore relief for people trading up or down. This will come back to haunt us.
The cost of housing is changing Irish society every day. People pay high child care costs because they have large mortgages on three-bedroom houses. There is no choice for couples who have children but for both partners to work. That is not the type of society I want. If two people want to work and pay for child care, that is their concern.
A question tabled for today seeks a professional meals-on-wheels service. The knock-on effect of the changes in society is that services that were provided on a voluntary basis must now be paid for. Housing estates are empty during the day and there is nobody to deliver meals. In any part of Dublin I know people in their 70s and 80s deliver meals on wheels to other people their own age who are less healthy than them. Estates are empty and that is not people's choice — they are being forced into it. Any costs implicit in increasing personal indebtedness and driving up salaries and wages will cause huge problems in the future, including social problems, which are the most important aspect. From that perspective, we should do anything we can to keep the price of housing down and reduce the costs for young people and those having to trade up.
My final point relates to the proposed commission on taxation. I have no problem bringing in people to give advice on different types of taxes but any decisions on taxation should be taken in the Houses of the Oireachtas. I do not want outside people telling me we should have this or that tax — we should be able to make such decisions ourselves as the elected representatives. We should by all means seek advice but far too much is being done outside these Chambers. I hope any decisions taken will be properly debated in this House so that we do not wake up one morning and find that some agreement has been entered into with outside bodies without our having had the opportunity to debate the issues.
I am more interested in the type of society we will end up with. I cannot speak with authority for rural Ireland but have considerable experience in the cities, which I have represented for a number of years. What is happening is frightening and we should do anything we can to help people get a decent home for themselves with a reasonable mortgage. The argument should not solely focus on the loss of revenue from changes to stamp duty but should look at the subject in a broader context. That is what the Fine Gael and Labour Party proposals in the last election attempted to do.
I took part in a similar debate on radio with the Minister for Defence, Deputy O'Dea, recently and I will make my point again. With the greatest respect to the two Ministers sitting opposite, 41% of people voted for their proposals and 59% against. They should not forget that. They cannot say their proposals for stamp duty received a mandate from the people as they did not. The Government is entitled, if it has the numbers, to vote through whatever policies it wishes but it did not win the argument at the election as 59% of the people disagreed with its proposals, while 41% agreed.
I greatly respect Deputy Barrett and what he had to say. However, the logic of his final point places an obligation on me to implement Fine Gael policies in Government.
The Government, if it has a majority to go through the lobbies, is entitled to implement its policies.
That is the point.
The Minister claims he won the argument but he did not.
Far more voted for my party than Deputy Barrett's, although I accept there were many other issues. His point was, however, well articulated. As we all knocked on constituency doors we all came across stamp duty as an issue. It is not a question of looking at the issue with a narrow financial focus — I am talking about equity. Why, as would be the case in the fully developed version of the Deputy's proposal, should 2.1 million people pay for a reform for 54,000, costing €600 million to €700 million of taxpayers' money?
This tax raised €350 million four years ago but today it raises €1.5 billion. The Minister has increased the amount of money it takes from people in this regard by a massive amount in four years. It is not as if the Minister is saying from a static point of view that we need to give a concession to people who are paying stamp duty. He is looking at a market where he has exacted a huge extra volume of money. That is why there is such a sense of unfairness about this tax.
That is a point of view. However, the main point is that we have seen a reduction of taxes on labour and moving towards taxes on capital. That has happened. Since we came into office, the capital tax take as a percentage of total tax revenues has risen in this administration from 4.6% to almost 16% last year. That is a fourfold increase from the time we came into office. We did that to make sure that we reduce taxes on labour to promote employment as part of our economic strategy of having a greater number of people working.
The Government has done that because house prices have exploded.
These are choices. About 70% of the windfall elements of capital taxation went towards further reducing national debt. That is what one does with windfall taxes. One does not project forward provisional services on the basis of the windfall because it might not be repeated. When the recession hit the European and the wider economy in 2001, we saw how quickly our revenue base can dwindle. I think it was around €5 billion within 12 months, when we moved from a 10% growth rate to a 1% rate by January 2002. That highlights a point made by Deputy Burton, which is that one must be very careful before one decides to erode the tax base by that much. If the residential housing tax take for stamp duty is €1.3 billion, and Deputy Bruton's proposal was to cost €600 million, that means a 40% cut on the tax base under that tax head. That is pretty significant. As our sustainable growth rates in the future will not be the 5-7% averages that we have seen in recent years, but more towards 4-4.5%, we will have to be careful with the tax revenues we take in.
Deputy Bruton points out that the tax take has increased and is going towards the provision of services, and that is fine. That is the change in the matrix of the tax and spend that we have, which is sustainable if we keep a healthy housing market. I accept the point Deputy Barrett made that we have seen a rise in prices, but we have also seen a rise in output. We were building 33,000 houses per annum ten years ago, but we are now building 93,000 houses. This is not simply on a speculative basis, but on the basis of strong fundamentals in the economy, such as a migrant community that has come in, a rising population, greater disposable income, greater social mobility, better paid jobs, tax reforms which have put more money in people's pockets. That is what people do when they become more prosperous. They trade up and they buy a bigger and better house. They can afford the luxuries that would otherwise not have been available to them when we had unemployment rates of 15% and 50,000 people were emigrating every year. We recognise the change and we acknowledge the challenges that have come with that change.
The first-time buyer has traditionally been the life blood of the new housing market. That was always the means by which people could plan an industry. The overall policy of successive governments was to promote home ownership and we now have a very high level of home ownership here, when compared to our European counterparts. However, total housing per capita still has some way to go to meet the housing stock of more advanced European economies. The Central Bank states 60,000 to 65,000 units per year are sustainable in the mid to long term. We must now move from 88,000 units to 65,000 units with a soft landing so that we can sustain that level of growth, continued tax revenues, employment, etc., on the basis of an annual housing output which, even at that stage, would be twice the housing output of ten years ago. That is the change in the level of economic activity we sustain in this economy because of strong fundamentals, demographics, rising incomes, etc. Despite rises in interest rates in recent years, the interest rate regime is benign compared to that which applied ten or 15 years ago.
Ending discrimination so that first-time buyers get the full exemption on purchasing a new or a second-hand house increases a first-time buyer's range of choice. We must have regard to the social aspects of not having to buy in a new housing estate away from the immediate family circle if a second-hand home is available in the locale to enable people to support the family cohesion, to which Deputy Barrett adverted and which is also a legitimate policy objective in the context of all of this discussion. These are consequences that can emerge as a result of these changes, which I accept are not revolutionary but which bring certainty and stability. People understand the message and know where they are going.
The rest of the industry now can pick up. Having had this debate for the past five or six months, we can now get on with maintaining a housing policy, which — allied to the private residential market on which we are probably concentrating in the context of this discussion — will see us, under the national development plan, fully fund the NESC requirement on social and affordable housing. It will ensure that our planning mechanisms are in place and every area is prepared to take the required planning permission decisions to ensure that the housing supply does not get to the extent where one sees — in the area about which Deputy Barrett spoke — a vast increase in house prices far above the national averages. My understanding of the position in that part of south County Dublin is that it is difficult for planning permission applications to get through and the level of affordable and social housing being built in the constituency of Dún Laoghaire is not what one would expect, given the population and the demand.
In fairness to the construction industry, by which I mean everybody working in it because they depend on it, it has been able to respond to that requirement of growing output. It has responded, professionalised and improved. One does not encounter the archetypal messing builder about whom people spoke 20 or 30 years ago. Such builders cannot survive in the far more improved market, and with the far more sophisticated customer base, which they must now serve. All of that needs to be put into the mix.
We are simply honouring a programme commitment. I realise it does not meet the approval of the Opposition. All I am saying is we have had that debate and I just want to honour the commitment. Our first statement on return to office was that before the Dáil adjourned for the summer recess, we would enact this legislation so that the market and the people who require housing will know exactly where we are going after the prolonged uncertainty we had up to now.
I thank the Minister for his detailed response to the Labour Party amendment. On the construction industry in general and its critical importance to the economy, I remind the Minister that in March construction firms employing more than five persons reduced their workforce on an annualised basis for the first time in four years. Figures for housing starts dropped significantly for the period September to March 2007, according to Davy Stockbrokers. The Construction Industry Federation is anticipating a sharp decline in housing output this year. The federation refers to housing completions in the range of 70,000 to 75,000, a considerable decrease.
It amuses me how difficult is the debate on one-off housing in rural constituencies. In Fingal and Dublin West I do not generally get involved in housing applications concerning fewer than 500 to 2,000 houses. In many of those developments the current phases are finishing and people are being let go. Fianna Fáil does not have a monopoly on the support of people working in the building trade. People who worked on my campaign were foremen who have been asked to go on two or three day weeks where previously they worked all the hours God sent. We are entering a changed phase in the construction industry. The construction industry has brought many of the problems upon itself in terms of greed and land prices.
The key problem in the market is affordability, which is determined with reference to interest rates. The European Central Bank indicates that by the end of this year we may see one or two more interest rate rises. This will cause the affordability issue to become sharper for families.
I saw a Green Party Member wander from one side of the Chamber to the other, without resting in the House to take part in the debate. It is unfortunate that they feel too scared, nervous or shy as Government backbenchers to contribute to the debate.
Regarding Deputy Mansergh's point, I recall the Green Party manifesto referring only to stamp duty relief targeting families trading down. Those in big houses in south county Dublin, where many Green Party members and voters live, were seized of the difficulties of families trading down and younger families buying the empty nest three and four bedroom houses. In a democratic sense it is a pity that the Green Party failed to participate in today's debate. The Labour Party amendment, about the work of the commission on taxation, is reasonable and considered. These issues ought to be debated in a forum where all factors were raised by me, the Tánaiste and the contributors from Fine Gael. These factors include how we help people who seek to buy an affordable home near work and family with access to child care and schools. How can the Dáil address that?
I refer to the comments of Deputies Finneran and Mansergh. The former found it unrealistic that wealthy first-time buyers would buy palatial homes for a couple of million euro and whose savings in stamp duty forgone would be higher than the price of an affordable home for a first-time purchaser. There are many trust fund children in wealthy districts of this and other major cities and areas throughout the country who will have an opportunity opened up to them by Fianna Fáil to buy or be assisted in the purchase of very expensive properties. These people will be exempted. That is fair enough if that is the Minister's policy objective, but the focus of this policy ought to be directed at people who need assistance in the housing market. We have our Paris Hiltons in this country who, given their trust funds and the family accumulation of wealth, do not have a problem buying and can afford to buy expensive properties. This measure from Fianna Fáil will provide them with an incredible bonus. Even the Progressive Democrats stated the first-time buyer relief should be restricted to houses of up to 1,350 sq. ft., the size of a modest three or four bedroom family home.
The Minister referred to equity, which is an important issue. When it comes to the construction industry, while Fianna Fáil has measures intended for the many, it always slips in a few little specials intended for the few. The lack of any restriction on who will be the beneficiaries of this measure is yet again a large bonus for well-off people who do not especially need the assistance of stamp duty relief or for whom stamp duty relief could be restricted to a total relief of €70,000, which would bring them up to a house purchase in the €500,000 category, which is perfectly reasonable for a first-time buyer.
I previously asked the Minister a question about capital gains tax. He ignored my question on tax avoidance in regard to stamp duty, specifically by sectors of the construction industry, by the entering into of licensing arrangements. In the previous Dáil the Minister undertook to reform that loophole which is being utilised only by certain elements in the construction industry to drive the housing market even wilder. It deserves reform for that reason alone. We congratulated the Minister on the late amendment he introduced to the Finance Act in this regard but he has not commenced the section. Every developer who is involved in stamp duty avoidance by licensing arrangements has had time since the budget and Finance Act debate to sort out ongoing situations where they are avoiding stamp duty. In parts of south County Dublin enormous transactions are taking place, for example, the purchase and sale of property in the Ballsbridge area. Almost all of that will be done through transfer of shares, thus avoiding stamp duty. The moneys involved are significant.
The Minister referred to the equity argument, which is a fundamental of the Labour Party position. Where is the equity in bringing in a measure which is seriously flawed when the Minister does not take the opportunity to close off the loopholes he and his officials know exist? I expect the Minister, as a solicitor, knows well that if one can find a way of avoiding stamping a document that will get one out of the stamp duty problem, that will be the approach taken. Instead of exchanging a property, however, if one exchanges shares, one qualifies for the share rate as opposed to the property rate. We have heard all that before. However, the Tánaiste has acknowledged that from the point of view of equity, it is difficult to tell someone this.
I know of people who bought first-time apartments in parts of Dublin West at whatever cost they could afford at the time, say €200,000. They did it right, got married and had a family. Such couples now live in one bedroom apartments in west Dublin with two children. Only one works as both cannot afford to so do because of the cost of child care and they are caught in a classic bind whereby they are now unable to trade up. What should they do? The local authority has told me they should go on the dole, hand back the keys to the house and abandon it.
The Minister for Defence, Deputy Willie O'Dea, may be somewhat surprised because in Limerick, the Government is moving correctly to try to rescue such situations. In west Dublin, however, I can produce several such families from my case list and I have spoken publicly about them. They have appeared in the media. The husband in one couple works for an international computer company and is on a fairly standard wage. They married, which was a big mistake, and have two little boys of three and six years of age. They live in a one bedroom affordable apartment that they are purchasing. Although I have been informed officially by the council that they have a housing need, they are unable to trade up.
Moreover, if they ever get to the position whereby they can trade up, they will have lost their first-time buyer status. As they would be buying at a cost of approximately €400,000 at most, we are only talking about €25,000 to €27,000. However, when one works for a multinational and only earns €30,000 to €35,000, one does not qualify for affordable housing. In Fingal, which has the highest number of affordable houses, the earning criteria at present for such housing is €41,000 to €45,000. The family in question cannot afford to have the wife working because she is obliged to mind the two children as child care costs in Dublin West are up to €300 per child per week. They are in a series of catch-22s which discriminate against married families and which were introduced by the Government.
It is the same throughout Dublin.
It is particularly acute in Dublin West because houses and apartments are cheaper there. South Dublin is more expensive and as the Tánaiste stated, he can understand the housing market there is extraordinary. However, Dublin West more closely resembles the rest of Ireland in this regard. Fingal is building more houses and is creating more affordable apartments. What does one do if the family drops out of employment, walks out of the apartment, hands the keys back, reneges on the loan and goes on the public housing list?
Members used to have a view that one helped such families. However, this measure will not help them and this is the reason the amendment refers to "the plight of families and individuals leaving properties such as apartments to trade up to an affordable family home". Fianna Fáil used to fancy itself as being family friendly. However the Tánaiste's predecessor as Minister for Finance introduced individualisation and the law of the market, which told women in the home in particular that they should go out to work or they would be penalised otherwise. Stamp duty in this regard is a carryover that penalises families that try to trade up.
It is not beyond the wit of this Chamber and Members from all sides to devise a mechanism that does not destabilise the property market but that states that families in work should be encouraged to stay in work, as well as being encouraged and facilitated to have a home of a reasonable size. This is the challenge faced by the Tánaiste.
The Tánaiste stated that one could get a lovely detached house in many parts of his constituency for less than €300,000, but that amount would not buy a family house in most large cities and towns, particularly Dublin, Cork, Galway and Limerick. The challenge for the Tánaiste is to face up to the fact that families are getting a rough time and a raw deal from the Government. Everyone on this side of the House approves of the general arrangements for first-time buyers, but the Tánaiste is missing the point.
The construction industry is entering a new and more difficult phase, but many of the people in it are super-greedy. In many ways, super-greed will kill the goose that lays the golden egg. A way of counteracting this is to devise family-friendly policies for those who wish to trade up to affordable houses. A mechanism to achieve this is being offered to the Tánaiste in this amendment and I hope he will accept it.
Comhghairdeas duit ar an post nua, a Cheann Comhairle.
Go raibh maith agat.
I congratulate the Minister for Finance on his elevation to Tánaiste.
I thank the Deputy.
Will the Tánaiste consider the position of the disabled? Take the example of a middle income family, where the children have been reared and the husband and wife are living together. If the husband or wife has a serious road traffic accident and becomes disabled, they can afford to sell their house and buy a bungalow more suited to their needs because their current two-storey house would cost too much to adapt to their requirements and would otherwise be unsuitable. Those people, who are not even looking for a grant, are being penalised.
The Tánaiste and I know that grants for the adaptation of a house range from €13,000 to €20,000. If one lives in the greater Dublin area or in the large cities, not much adaptation will take place for that sort of money, but the people in my example only want to sell their house to buy a bungalow they can adapt, not to get a grant. They could be penalised by €70,000 or more.
I am appealing to the Tánaiste's sense of social justice to show compassion to the disabled, to not burden them further. Would the loss of revenue not be minuscule in the overall scheme of things? It would send a strong message of real support for the disabled. Will the Tánaiste reconsider the matter?
I ask Members to emulate Deputy Reilly's brevity if possible because other Members are offering and I would like to include everyone.
I congratulate the Ceann Comhairle on his elevation to his current office. I hope to have a mutually rewarding relationship with him during the next few years.
Does the Deputy not mean mutually exclusive?
Having listened to the debate from my office, the Opposition has it right. Notwithstanding what the Government promised in the course of the election or the fact that because it finds itself in office, it believes it has a moral high ground on which to perch, it can be rightly stated that only one of the parties constituting the Government escaped unscathed in the recent election. One could uncharitably call it a collection of losers with one exception. I will not go that far.
With more seats. The Deputy should do his sums.
The Tánaiste is an intelligent man, but I do not know whether he realises fully the damage being done to the home, the family and the structure of society as we know it. The new generation is being driven out of Dublin city and forced to commute long distances from all over the country when travelling to the city in the morning and returning home at night. They are being forced to jam our roads, which is the traffic we are seeing. I cannot understand why the Government does not recognise this fact and take the measures suggested to correct it.
My colleague, Deputy Barrett, observed that in a ten-month period, house prices in a particular development increased by €60,000 to €80,000. That is nothing. There are countless instances throughout the State where house prices have increased by the same amount between morning and evening. Such houses are advertised in the morning and having been viewed by one or two potential buyers, any who come later, are told the houses advertised at the original price are sold and those in the next batch will cost €50,000 more.
The Government has been the most serious beneficiary of the housing inflation that has affected our economy in recent years. Nothing was done to arrest that inflation. The Government cannot continue indefinitely to be a beneficiary in such circumstances. The Minister's former colleague and former Minister for Justice, Equality and Law Reform, Michael McDowell, was of the view that the Government does not need the revenue from stamp duty. Does he know something we do not, or does the Minister for Finance know something he is not telling us and which may prevent him from moving on this issue? Has he divine inspiration or does he know anything at all?
There is an element of Je ne sais quoi about Deputy Durkan today.
Deputy Burton referred to individualisation in the tax system and the difficulties for families when both parents are forced to work outside the home. In the United States, the detrimental effects of such circumstances have been labelled "nature deficit disorder". It is increasingly the case in that society that children are deprived of both parents for the duration of every working day to such an extent that social difficulties arise when they reach their late teens. It is not something we should laugh about, because there are indications that something similar is happening here. Will the Minister bear in mind the serious problems that exist in terms of housing affordability and access, including the ability of people to move in either direction on the property ladder or to get on it in the first instance?
I wonder when the word "unit" was appropriated for the housing market. It apparently coincided with a marked decrease in the size of new homes and the space available to their unfortunate inhabitants. One could embrace some of these newer "units" with both arms.
Deputy Burton spoke about the plight of families and individuals wishing to trade up to larger homes. In my constituency of Dublin South-Central — in areas such as the inner city, Ballyfermot, Walkinstown, Crumlin and Drimnagh — average prices for a modest family home range from €300,000 to €400,000. This is far below the haughty levels at which the houses of many of Deputy Barrett's constituents are valued. In many areas of my constituency, however, a large proportion of the residents are elderly. Some of these grey-haired, well quaffed senior citizens enjoy all the community facilities available in their localities, but they also miss the spirit of youth.
Young people are unable to purchase homes close to their parents, grandparents and other family members. The traditional extended family network persists to a greater degree in inner city areas than elsewhere. While the nuclear family may be the norm in the suburbs, in the working class areas of Dublin that I represent people place great store in the support offered by a greater family network. They are able to go to work because their children can be looked after by family members close by. All of this will be facilitated by the legislation before us by enabling first-time buyers to purchase homes in the areas where their families have lived for generations. That will be a great boost to community spirit in the aforementioned areas. Deputy Burton represents an area comprising similar economic strata to mine.
What about Templeogue or Terenure? One cannot purchase a €300,000 house in those areas.
I am about to discuss that issue. There are very few trust fund children in the areas I have mentioned, nor are there many in Templeogue or Terenure. The area contains 45,000 houses, most of which I have visited over recent months, and only 100 — calculate that as a percentage — are valued anywhere close to half the value of a far greater percentage in the Dún Laoghaire-Rathdown council area, some of which Deputy Barrett represents.
I am all right Jack.
Not in Terenure.
Over the years, Deputy Burton has raised the issue of millionaires who have not paid taxes and the Minister for Finance has introduced measures to reduce the options for avoiding tax. The general election showed that the electorate agreed with the economic policies enunciated by the Minister. In the two or three weeks prior to the election, when people thought about the right way to vote, they decided in their hundreds of thousands for the economic policies set out in the Fianna Fáil manifesto. I congratulate Deputy Burton on her election, which was at the expense of a former Deputy who is not the greatest advocate of trust fund children or high wealth individuals.
We cannot mention people outside of the House, if the Deputy does not mind. They are not here to defend themselves.
I do not think anything I said about the individual would impugn his character or reputation in any way, and I am sure he would agree with me. However, I respect the Ceann Comhairle's comments on the matter.
I accept what has been said with regard to a downturn or a lack of confidence in the construction industry during February and March, which was a result of the hysteria created by Fine Gael and Labour on stamp duty. That lack of confidence is being addressed by the Bill before us.
What about Michael McDowell?
Did Mr. McDowell and the previous Government not start the debate?
Deputy Ardagh without interruption.
I cannot speak about people outside the House. I merely want to state that whereas there may have been a lack of confidence in previous months, the situation has changed significantly and the reports from the wholesale distributors of equipment and household goods are positive. The increasing number of houses which are being started or completed this month as a result of definite knowledge about stamp duty is helping to restore economic confidence.
As the Minister stated, we do not expect the same numbers of houses to be built in the future, but somewhere in the region of 60,000 will be built with confidence and will be sold, which will help to continue the type of economic growth this country has come to value. It will continue to be a good country to live in, for children to be reared in and for first-time buyers to buy houses in without having to pay any stamp duty.
Deputy Creed, to be followed by Deputy Noonan. I remind Deputies that we must conclude by 5.45 p.m.
Like previous speakers, I congratulate the Ceann Comhairle on his appointment and the Tánaiste on his elevation to that post.
I listened to this debate in my office for some time and found fundamentally depressing the assumption that those on the Government benches have a monopoly on wisdom on these matters. Nothing demonstrated that more clearly than Deputy Ardagh's contribution. It really is a dialogue of the deaf here, although there is merit in some of the content of all the contributions.
I accept the Minister's points that we must safeguard the Exchequer and that there is a demand for funding for a variety of public services. However, we must put the want-to-be home owner centre stage in this debate. Home ownership has been a long cherished ambition in society and it is now a dream for many people who, ten, 15 or 20 years ago, would never have been clients of local authorities for housing, be it social or affordable. That is the issue that must be centre stage in this debate. While there may be a cost to the Exchequer of yielding on some of the points raised, there is also a cost to society of not addressing this issue, which the Exchequer will end up bearing indirectly. There will be a greater demand for the Department of the Environment, Heritage and Local Government to build more social and affordable housing because people are put at such a financial disadvantage that they cannot afford to buy houses themselves. It is a dialogue of the deaf. It is fundamentally depressing.
All the Minister needs to do is to yield on some of the issues raised, which have merit. If there were a willingness to engage in serious debate, it would not be beyond the capacity of this House to come up with a solution that would address the problems of many want-to-be home owners for whom this Government is killing the dream.
The solution is to abolish stamp duty.
Like others, I congratulate the Ceann Comhairle and wish him a very successful and fulfilling period of office.
I welcome the Bill as a modest measure. Certainly it will be of benefit annually to 2,000 or 3,000 people——
Four thousand people.
——or 4,000 people, if that is the estimate. However, it is a very small and modest proposal in the context of the housing industry and the difficulties faced by many families.
It restores certainty to the market, which will be reflected in some positive trends over the summer months. However, it does nothing fundamental. There is a serious issue facing the Minister as he prepares his next budget. Whatever about the merits of the commission on taxation, he needs to make a serious economic statement in the early autumn giving his view on where the building industry is going. The demand for mortgages in the first half of the year has dropped by 21%. It peaked at over 30% last year. The 21% drop in the demand for mortgages has nothing to do with the former Tánaiste's statements on stamp duty but has to do with rising interest rates. Housing starts for the first part of the year run as follows. In January, year on year, housing starts were down by 17%, in February they were down39%, in March they were down 23%, in April they were up 4% and in May they were down 43%. The 12 month trend shows a drop from approximately 90,000 housing units last year to 60,000 units this year. That is an astronomical drop. However, the demand for social housing is not the same as financial demand. The number of housing starts can drop significantly and, with it, take down the number of affordable and social houses that are statutorily required to be put in place by builders and developers. At the same time, there is an increasing social demand for houses for those who simply cannot afford them. Many builders have priced themselves out of the starter market. With eight interest rate increases of 0.25% each over the past 18 months, and a forecast of three more to follow, affordability is now a major issue.
The contention by many economists that the supply of houses has now met demand is not accurate. The drop in the supply of houses to 60,000 will be close to the financial demand for houses. It will be close to the number of people who can afford to purchase but beyond that there is a huge social demand for houses which will not be met. The number of affordable and social houses being put in place by builders and developers is dropping in proportion to the total number of housing starts this year. The Minister knows that the building and construction sector makes a huge, yet disproportionate, contribution to the wealth of the country and the Minister's revenue flow. I think it is now €3.5 billion or €4 billion, but this measure will not reduce that very much. The number of housing starts will significantly reduce the flow of VAT, income tax and PRSI into the Minister's coffers as soon as the autumn. I wonder what the estimate by the Departments of Finance and the Environment, Heritage and Local Government is of how many people will not commence work this summer in the building industry after the builders' summer holidays. I would be interested to know how many will not go back.
There is also some mismatch in the infrastructural programme. My information is that the National Roads Authority has not given out new contracts yet this year for structural work. The Minister should beef up the national plan by investing heavily in the roll-out of infrastructural work to take up the obvious redundancies that will occur in the house building sector. The Minister knows the issues as well and probably better than any of us, but it is time he produced a reasoned paper on trends early in the autumn. In that way, when we come to debate the budget we will base our arguments on solid facts rather than anecdotal evidence or speculation.
Is Deputy Burton pressing her amendment?
Amendments Nos. 3, 8 and 26 to 28, inclusive, are related. Amendments Nos. 27 and 28 are technical alternatives to amendment No. 26. All five amendments may be discussed together, but I am afraid Deputy Bruton has only one minute left.
I move amendment No. 3:
In page 3, before section 1, to insert the following new section:
1.—(1) Section 92B of the Stamp Duties Consolidation Act 1999 is amended--
(a) by substituting the following for subsection (2):
"(2) Stamp duty shall not be chargeable under or by reference to paragraphs (2) to (6A) of the Heading ‘CONVEYANCE or TRANSFER on sale of any property other than stocks or marketable securities or a policy of insurance or a policy of life insurance' or clauses (ii) to (vii) of paragraph (3)(a) of the Heading ‘LEASE’, as the case may be, in Schedule 1 on any instrument to which this section applies.”,
(b) in subsection (3)—
(i) in paragraph (a) by substituting “first time purchaser,” for “first time purchaser, or”,
(ii) in paragraph (b) by substituting “during that period, and” for “during that period.”,
(iii) by inserting the following after paragraph (b):
"(c) any instrument, executed on or after 1 January 2007 and on or before the date of the passing of the Finance (No. 2) Act 2007, that does not contain such a statement as is referred to in paragraph (a) or (b)—
(I) section 92 applies to that instrument, and
(II) the purchaser has complied with, and has undertaken to continue to be bound by, the conditions, liabilities and obligations under section 92 and has satisfied, or, as the case may be, undertaken to be bound by, the conditions (including the condition set out in such a statement as is referred to in paragraph (a) notwithstanding that the said instrument does not contain such a statement), liabilities and obligations referred to in this section,
(I) had that instrument contained a statement such as is referred to in paragraph (b), such statement would have been true and correct, and
(II) the purchaser has satisfied, or, as the case may be, undertaken to be bound by, the conditions (including the conditions set out in such a statement as is referred to in paragraph (b) notwithstanding that the said instrument does not contain such a statement), liabilities and obligations referred to in this section.”,
(c) in subsection (4)(a) by deleting “the difference between” and “and the amount of duty which was actually charged”,
(d) by inserting the following after subsection (8):
"(9) Where, by virtue of the amendment of this section by the Finance (No. 2) Act 2007, an instrument is one in respect of which stamp duty is not chargeable under or by reference to any of the paragraphs or, as the case may be, clauses referred to in subsection (2), the Commissioners, on a claim being made to them in that behalf and on the conditions set out in subsection (10) being satisfied, shall cancel and repay such duty paid as would not have been charged had this section been so amended before the instrument was executed.
(10) The conditions required by this subsection are that the purchaser (in this subsection referred to as the ‘claimant'), when making a claim for repayment, shall produce to the Commissioners—
(a) the stamped instrument,
(b) a declaration made in writing by the claimant, in such form as the Commissioners may specify, confirming to the satisfaction of the Commissioners that—
(i) where the instrument is one to which this section applies by virtue of paragraph (a) or (b) of subsection (3), the claimant has complied with the conditions, liabilities and obligations under either or both this section and section 92, as the case may be, and has undertaken to continue to be bound by those conditions, liabilities and obligations,
(ii) where the instrument is one to which subsection (3)(c)(i) applies, the claimant has complied with, and has undertaken to continue to be bound by, the conditions, liabilities and obligations under section 92 and has satisfied, or, as the case may be, undertaken to be bound by, the conditions (including the condition set out in such a statement as is referred to in paragraph (a) of that subsection notwithstanding that the said instrument does not contain such a statement), liabilities and obligations referred to in this section, or
(iii) where the instrument is one to which subsection (3)(c)(ii) applies, the claimant has satisfied, or, as the case may be, undertaken to be bound by, the conditions (including the conditions set out in such a statement as is referred to in paragraph (b) of that subsection notwithstanding that the said instrument does not contain such a statement), liabilities and obligations referred to in this section,
(c) such information as the Commissioners may reasonably require for the purposes of this subsection.
(11) A reference in subsection (3)(c) or subsection (10) to the purchaser, shall be construed as including a reference, where there is more than one purchaser, to each and every one of the purchasers.”.
(2) This section applies as respects instruments executed on or after 1 January 2007.".
This amendment is designed to bring the date of retrospection back to 1 January, effectively back to the date of the budget. I know that Deputies on the Government side of the House are sympathetic to this proposal. I ask the Minister to implement it.
Is it possible to speak to the amendment?
As it is now 5.45 p.m., I am now required to put the following question in accordance with an order of the Dáil of this day: "That each of the sections undisposed of is hereby agreed to in committee and the Title is hereby agreed to in committee, the Bill is accordingly reported to the House without amendment, Report Stage is hereby completed and the Bill is hereby passed."
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